With a New Phone, Google May Challenge Apple

December 15, 2009 at 11:41 AM Leave a comment

SAN FRANCISCO — Two titans of the tech world, Google and Apple, may soon be engaged in hand-to-hand combat. Or, more precisely, handset-to-handset combat.

Google plans to begin selling its own smartphone early next year, company employees say, a move that could challenge Apple’s leadership in one of the fastest-growing and most important technologies in decades.

Google’s new touch-screen Android phone, which it began giving to many employees to test last week, could also shake up the fundamentals of the cellphone market in the United States, where most phones work only on the networks of the wireless carriers that sold them.

The company, using

the power of its brand, plans to market and sell the new phone directly to consumers over the Internet, and buyers would be able to sign up for service from any compatible provider, the employees say.

The introduction of a Google phone — manufactured to its hardware and software specifications by an Asian maker of handsets — would be an important and risky departure for Google. Until now, it has made software to power cellphones that are built and marketed by partners, and it has largely avoided selling hardware.

The apparent shift underscores the fact that mobile phones are quickly becoming the biggest technology battleground of the future, as consumers increasingly rely on their phones to browse the Internet and perform other computing tasks.

It also indicates Google’s determination to make its mark on yet another industry, as it has done previously in advertising, books and online videos.

But analysts say it is not clear that Google’s success on the Internet will carry over into the design, marketing and distribution of hardware. Many companies have tried to make similar shifts and stumbled. Microsoft turned the Xbox into a hit, but when it pushed aside its partners in the music-player business in favor of its own Zune, it failed to gain traction against Apple and its iPods.

The phone’s success could also depend on how Google chooses to price it. Most Americans buy phones that are subsidized by wireless carriers, which recoup that cost by locking customers into contracts. IPhones that cost consumers $199 actually cost AT&T about $550, analysts say.

Katie Watson, a Google spokeswoman, declined to comment on the company’s plans. She referred reporters to a blog post published Saturday in which Google said that the new device was a “mobile lab” that would let employees test out new technologies.

Google employees who spoke on the condition of anonymity because plans for the phone were supposed to be confidential said that the device, manufactured by the Taiwanese company HTC, was thinner than Apple’s iPhone, with a slightly larger touch screen. It could be available as early as January, they said.

Employees say the phone will be sold unlocked, meaning that buyers will be able to choose a service provider, and will be based on G.S.M. technology, which is used by AT&T and T-Mobile in the United States and by most other carriers around the world. It is named Nexus One, according to various reports and to digital traces that the phones have been leaving on Web sites.

Google had long insisted that it was not interested in building and selling phones, saying it preferred to rely on hardware partners and wireless carriers to market a wide variety of phones powered by Android, the operating system that it offers free.

In October, Andy Rubin, vice president of engineering for Android at Google, scoffed at the idea that the company would “compete with its customers” by releasing its own phone, according to the technology news service CNet.

Analysts say that the apparent shift signals a recognition by the company’s executives that Google needs to take more control of its destiny in the wireless world.

“They perceive mobile as the next major opportunity,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein. “It is too big a risk to drive the strategy through their partners. They want more say and more control.”

In addition, analysts say that the iPhone, despite prominently featuring some Google services, makes the company nervous.

“They don’t want to have access to Google being controlled or influenced by one player like Apple,” said Ben Schachter, an analyst with Broadpoint AmTech, a research firm.

Google wants to get more people using Web-friendly phones in part because it depends on the growth of search advertising, which is slowing on PCs. On cellphones, however, use of Google’s mobile search engine grew 30 percent in six months this year, Mr. Schachter said. “That’s huge, and a majority of that growth is coming from the iPhone,” he said. “When that happens, Apple has a lot of power over influencing users’ behavior.”

Until recently, Google and Apple were considered close allies with a common enemy: Microsoft. They shared two board members, Eric E. Schmidt, the chairman and chief executive of Google, and Arthur Levinson, the former chief executive of Genentech.

Entry filed under: Mobile Tech & Trends, Web News & Trends. Tags: , , , , , , , , , , , , , , , .

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